287 F.

3d 257

UNITED STATES of America, Appellee-Cross-Appellant,

v.
Thomas RYBICKI, Fredric Grae, Grae, Rybicki & Partners,
P.C., Defendants-Appellants-Cross-Appellees.
Docket No. 00-1044(CON).
Docket No. 00-1043(L).
Docket No. 00-1052(XAP).
Docket No. 00-1055(CON).

United States Court of Appeals, Second Circuit.

Argued December 4, 2000.
Decided April 23, 2002.

COPYRIGHT MATERIAL OMITTED Barry E. Schulman, Law Office

of Barry E. Schulman, (Deborah A. Santelmo on the brief), Brooklyn, NY,
for Defendant-Appellant-Cross-Appellee Rybicki.
Ephraim Savitt, New York, NY, for Defendant-Appellant-Cross-Appellee
Grae.
Herald Price Fahringer, Lipsitz, Green, Fahringer, Roll, Salisbury &
Cambria LLP (Erica T. Dubno on the brief), New York, NY, for
Defendant-Appellant-Cross-Appellee Grae, Rybicki & Partners, P.C.
Daniel R. Alonso and Karen R. Sage, Assistant United States Attorneys
(Loretta E. Lynch, United States Attorney for the Eastern District of New
York, Peter A. Norling and David C. James, Assistant United States
Attorneys, on the brief), Brooklyn, NY, for Appellee-Cross-Appellant.
Before: WALKER, Chief Judge, CABRANES and STRAUB, Circuit
Judges.
JOHN M. WALKER, JR., Chief Judge.

Defendants-appellants Thomas Rybicki, Fredric Grae, and the law firm of

Grae, Rybicki & Partners, P.C. appeal from the January 27, 2000 judgments of
the district court, following a jury trial, convicting them of mail and wire fraud
and conspiracy to commit mail fraud, in violation of 18 U.S.C. 1341, 1343,
and 371, based on their practice of making payments through middlemen or
expediters to insurance company adjusters in return for more favorable
settlements in personal injury lawsuits.

Following an eight-week trial, the jury returned a verdict of guilty against each
defendant on twenty counts of mail fraud, in violation of 18 U.S.C. 1341, two
counts of wire fraud, in violation of 18 U.S.C. 1343, and one count of
conspiracy to commit mail fraud, in violation of 18 U.S.C. 371. Appellants
Grae and Rybicki were each sentenced by the district court to terms of
imprisonment of one year and one day, three years of supervised release, a
$20,000 fine, and a $1,150 special assessment. The district court stayed
appellants' surrender pending appeal. Appellant Grae, Rybicki & Partners, P.C.
was sentenced to three years' probation, an $80,000 fine, and a $4,600 special
assessment.

On appeal, appellants raise a host of legal and factual challenges to their

convictions. Most of these claims are disposed of by a summary order issued
simultaneously with this opinion. We write here only to address appellants'
argument that because the government failed to prove that the appellants
intended to cause or actually caused economic or pecuniary harm to the victim
insurance companies, there was insufficient evidence to establish that their
practice of using an intermediary to expedite the settlement of personal injury
claims through an insurance company adjuster with whom the intermediary
shared his fee constituted a "scheme or artifice to defraud" within the meaning
of 18 U.S.C. 1341 and 1346.

We hold that in order to convict a defendant based upon a scheme to defraud

another of the intangible right of honest services, as contemplated by 18 U.S.C.
1346, it is unnecessary to prove that the defendant intended economic or
pecuniary harm or that any such harm actually resulted from the fraud. All that
is required is proof (1) that the defendant engaged in a scheme to defraud; (2)
with the intent to deprive another of the intangible right of honest services; (3)
that it was reasonably foreseeable to the defendant that the scheme could result
in some economic or pecuniary harm to the victim that is more than de
minimis; and (4) that the mails or wires were used in furtherance of the scheme.
The evidence in this case supported such a finding by the jury, and, therefore,
appellants' convictions are affirmed.

BACKGROUND
5

Because appellants challenge the sufficiency of the evidence to support their

convictions, "we review all of the evidence presented at trial in the light most
favorable to the government, crediting every inference that the jury might have
drawn in favor of the government." United States v. Walker, 191 F.3d 326, 333
(2d Cir.1999) (internal quotation marks omitted). Viewed in this light, the
evidence at trial established the following.

Appellants are two Staten Island personal injury attorneys and their law firm. In
order to obtain favorable results, either as to timing or amount, in settling the
personal injury claims of their clients with the opposing insurance companies,
appellants would offer a kickback to a middleman or intermediary who would
approach the adjuster of the pertinent insurance company and arrange the
settlement. It was understood by all concerned that the payments made to the
middlemen, generally a percentage of the total settlement amount, would be
shared equally between the middlemen and the adjusters. Although each of the
insurance companies that employed the adjusters had written policies that
prohibited the adjusters from accepting any gifts or fees and required them to
report the offer of any gifts or fees, the payments offered to the adjusters were
accepted by them but were not reported to their employers. Moreover, the
participants of the conspiracy, including Grae and Rybicki, took considerable
steps to disguise and conceal the payments made to the middlemen and the
adjusters. Appellants were shown to have made payments to adjusters in at least
twenty cases that settled for an aggregate of $3,000,000 between 1991 and
1994.

At the outset of trial, the government acknowledged that it would not seek to
prove that the amount of any of the settlements had been inflated above what
would have been a reasonable range for that settlement. It maintained, however,
that the settlements were necessarily inflated above the amount that the
appellants' clients, personal injury plaintiffs (the "PI Plaintiffs"), would have
been willing to accept by at least the amount paid to the middlemen and
adjusters, since these amounts did not go to the PI Plaintiffs. The government
also established the jurisdictional requisite of use of the mails and wires
through evidence of phone calls made by the appellants to implement the
settlements, settlement statements mailed by the appellants to the insurance
companies, settlement checks (the fruits of the scheme) that the insurance
companies mailed to the appellants, several payments that were invoiced and
paid by mail, and mandatory filings, adulterated to conceal the payments, that
were mailed to the New York State Office of Court Administration ("OCA").

The government's proof at trial included testimony from three of the

middlemen involved in the scheme, including one who had formerly been an
insurance company adjuster and had dealt with Grae in that capacity as well,
and an insurance company adjuster who had accepted payments to settle cases
involving the Grae & Rybicki firm. Victim insurance company representatives
testified that the payments accepted by their adjusters violated internal
company policies. The government also introduced wiretap evidence of Grae
and Rybicki arranging the settlements of personal injury cases, together with
ledgers and records kept by three middlemen that reflected the pay-offs.

DISCUSSION
9

The mail and wire fraud statutes criminalize the use of the mails and wires in
furtherance of "any scheme or artifice to defraud, or for obtaining money or
property by means of false or fraudulent pretenses." 18 U.S.C. 1341 (mail
fraud statute); see also 18 U.S.C. 1343 (wire fraud statute). Appellants'
convictions were grounded on 18 U.S.C. 1346, which provides as follows:

10

Definition of "scheme or artifice to defraud"

11

For the purposes of this chapter, the term "scheme or artifice to defraud"
includes a scheme or artifice to deprive another of the intangible right of honest
services.

12

Congress enacted this provision in 1988 to expand the definition of "scheme or

artifice to defraud" in response to McNally v. United States, in which the
Supreme Court held that the mail fraud provision and, by necessary
implication, the wire fraud provision were "limited in scope to the protection of
property rights." 483 U.S. 350, 360, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987); see
United States v. Covino, 837 F.2d 65, 71 (2d Cir.1988) (noting that because
mail and wire fraud provisions are construed identically, McNally applies to
wire fraud as well). In so doing, the Court reversed a conviction involving the
deprivation of honest services of a public official on the ground that there had
been no allegation that the scheme at issue involved the deprivation of money
or property. Id. at 360-61, 107 S.Ct. 2875.

13

Prior to McNally, most circuits had recognized the applicability of 1341 to

frauds involving "intangible rights," including honest services frauds: "In the
private sector, purchasing agents, brokers, union leaders, and others with clear
fiduciary duties to their employers or unions [were] found guilty of defrauding
their employers or unions by accepting kickbacks or selling confidential

information." McNally, 483 U.S. at 363, 107 S.Ct. 2875 (Stevens, J.,
dissenting). Congress enacted 1346 in response to McNally and reinstated the
"intangible rights" doctrine. See United States v. Schwartz, 924 F.2d 410, 41617 & n. 2, 418-19 (2d Cir.1991) (discussing purpose of 1346 and its impact
on McNally and pre-McNally law); see also United States v. Frost, 125 F.3d
346, 364 (6th Cir.1997) (noting that every circuit to have addressed the
question has held that 1346 overruled McNally).
14

Notwithstanding the passage of 1346, appellants argue that a conviction for

honest services fraud under 1341 and 1343 still requires proof of actual or
intended economic or pecuniary harm to the victim proof, they assert, was
lacking in this case. We reject this effort to impose the rule enunciated in
McNally on a conviction for honest services fraud. Such a reading would vitiate
1346 and would contravene Congress's clear intent to bring within the scope
of the mail and wire fraud provisions fraudulent conduct that did not have as its
object the deprivation of money or property of another.

15

Not surprisingly, no Second Circuit case construing 1346 supports appellants'

argument. Rather, appellants rely almost exclusively on cases that applied the
McNally standard to conduct that occurred before the effective date of 1346.
See, e.g., United States v. DiNome, 86 F.3d 277, 283-85 & n. 5 (2d Cir.1996)
(applying McNally to pre- 1346 conduct, but affirming conviction based on
deprivation of information material to victim's economic decisions); United
States v. Mittelstaedt, 31 F.3d 1208, 1216-18 (2d Cir.1994) (applying McNally
standard to reverse counts based on pre- 1346 conduct, but affirming count
based on post- 1346 conduct); United States v. Miller, 997 F.2d 1010, 1016-20
& n. 5 (2d Cir.1993) (noting that 1346 is inapplicable to conduct that predated the statute's effective date and applying McNally); Schwartz, 924 F.2d at
416-17 & n. 2, 418-19 (holding that 1346 does not apply retroactively and
applying McNally standard to conduct at issue); Covino, 837 F.2d at 70-71
(reversing conviction for pre- 1346 conduct based on McNally).

16

Our 1346 cases have made clear, however, that the only intent that need be
proven in an honest services fraud is the intent to deprive another of the
intangible right of honest services. See United States v. Sancho, 157 F.3d 918,
921 (2d Cir.1998) (per curiam) ("The essential element of a violation of 1343,
incorporating 1346, is a scheme to deprive another of the `intangible right of
honest services.'"); see also Walker, 191 F.3d at 335 (noting that element of
specific intent to harm required by 1341 can be satisfied by proof that
defendant's mail fraud scheme was intended "to deprive its victims of `the
intangible right of honest services'"); United States v. Altman, 48 F.3d 96, 101
(2d Cir.1995) (purpose of mail fraud scheme must be either obtaining money or

property or depriving another of the right of honest services).

17

Appellants also argue that even if an intent to cause economic harm is not a
required element of an honest services fraud, some economic harm must, in any
event, result from the fraud. They point to the government's alleged concession
that all of the personal injury claims here were settled for fair value to argue
that no actual harm occurred in this case. This reading of 1341 does not even
conform to the rule announced in McNally: it was well-settled law both before
and after McNally that the government does not have to establish that a scheme
to defraud was successful or resulted in any actual harm to the victim. See
Walker, 191 F.3d at 335; DiNome, 86 F.3d at 283; United States v. D'Amato, 39
F.3d 1249, 1257 (2d Cir.1994) (citing Durland v. United States, 161 U.S. 306,
315, 16 S.Ct. 508, 40 L.Ed. 709 (1896)); Mittelstaedt, 31 F.3d at 1216 (citing
United States v. Wallach, 935 F.2d 445, 461 (2d Cir.1991)); United States v.
Starr, 816 F.2d 94, 98 (2d Cir.1987). Rather, the only significance in a fraud
case of proof of actual harm befalling the victim as a result of the scheme is
that it may serve as circumstantial evidence from which a jury could infer the
defendant's intent to cause harm. See United States v. Guadagna, 183 F.3d 122,
130 (2d Cir.1999) ("`[W]hen the "necessary result" of the... scheme is to injure
others, fraudulent intent may be inferred from the scheme itself.'") (quoting
D'Amato, 39 F.3d at 1257) (second alteration in original); see also United
States v. McDonough, 56 F.3d 381, 391 (2d Cir.1995).

18

In short, we hold that, in proving "a scheme or artifice to deprive another of the
intangible right of honest services" as the object of mail or wire fraud, the
government need not prove either that the defendant intended to cause the
victim economic or pecuniary harm or that such harm actually resulted from the
scheme to defraud.1

19

Appellants next argue that 1346's expansion of the definition of a "scheme or

artifice to defraud" to include a scheme or artifice to deprive another of "the
intangible right of honest services" is unconstitutionally vague. Where there is a
vagueness challenge to a statute that does not involve First Amendment
freedoms, the statute must be evaluated on an "as applied" basis. See, e.g.,
United States v. Whittaker, 999 F.2d 38, 42 (2d Cir.1993). Such a criminal
statute is not impermissibly vague if it provides explicit standards for those
who apply it and gives a person of ordinary intelligence a reasonable
opportunity to know what conduct is prohibited. See, e.g., United States v.
Schneiderman, 968 F.2d 1564, 1568 (2d Cir.1992), abrogated on other
grounds, Posters `N' Things v. United States, 511 U.S. 513, 114 S.Ct. 1747, 128
L.Ed.2d 539 (1994); see also United States v. Bohonus, 628 F.2d 1167, 1173
(9th Cir.1980) ("To withstand a vagueness challenge, a criminal statute must be

reasonably specific."). In addition, a statute's requirement that a specific intent

be proven may prevent even a broadly framed standard of conduct from being
held to be impermissibly vague. See, e.g., United States v. Margiotta, 688 F.2d
108, 129 (2d Cir.1982); Bohonus, 628 F.2d at 1174-75.
20

Vagueness challenges to the application of 1346 and honest services fraud to

similar conduct have been rejected by this and other circuits. See, e.g., United
States v. Frega, 179 F.3d 793, 798, 803 (9th Cir. 1999) (rejecting vagueness
challenge by an attorney convicted under 1346 for bribing state court judge);
Frost, 125 F.3d at 352, 370-71 (same in the context of university professor who
helped students to obtain degrees by fraud in exchange for their influence in
obtaining government contracts); United States v. Gray, 96 F.3d 769, 772, 77677 (5th Cir.1996) (same in the context of basketball coaches who helped
students obtain academic eligibility by fraud); United States v. Castro, 89 F.3d
1443, 1447-48, 1455 (11th Cir.1996) (same in the context of attorneys who
paid kickbacks to state court judges to obtain appointments as public
defenders); United States v. Bryan, 58 F.3d 933, 937-38, 941-43 (4th Cir.1995)
(same in the context of lottery director who abused his position to manipulate
award of advertising contract), abrogated on other grounds, United States v.
O'Hagan, 521 U.S. 642, 117 S.Ct. 2199, 138 L.Ed.2d 724 (1997); see also
Margiotta, 688 F.2d at 112, 129 (rejecting vagueness challenge to honest
services prosecution under 1341 for abuse of political position by distributing
insurance commissions to political associates); Bohonus, 628 F.2d at 1167,
1172-75 (same in context of abusing managerial authority over contract to
extort kickbacks).

21

A panel of this court, however, recently upheld a vagueness challenge to 1346

in the context of a bid contractor working for a state school authority who
wilfully breached a contract requirement that he pay the prevailing wage to his
employees. See United States v. Handakas, 286 F.3d 92, 2002 WL 449536, at
*1-*2 (2d Cir. Mar.22, 2002). After reviewing the language and history of
1346, the panel concluded that the phrase "honest services" was too vague to
give notice to a person of ordinary intelligence that a "breach of contract could
subject one to a mail fraud conviction." Id. at *13.

22

While we agree fully with the Handakas panel's observations concerning the
vagueness of the phrase "honest services," see id. at *7-*17, Handakas does not
aid appellants in this case. As Handakas itself observed, we are bound by this
court's precedents upholding convictions under 1346 that involved schemes,
like the one at issue here, in which the defendant breached or induced the
breach of a duty owed by an employee or agent to his employer or principal that
was enforceable by an action at tort. See id. at *12. For example, in Sancho we

affirmed the conviction of a real estate developer who, in seeking to obtain a

multi-million dollar letter of credit from a construction company to secure a
construction loan, agreed to bribe the person he believed to be the company's
financial consultant to induce the consultant not to disclose to the company that
the letter of credit would be invested in a sham financing program. See Sancho,
157 F.3d at 919. In United States v. Middlemiss we affirmed a 1346
conviction in which a New York Port Authority employee used his position to
obtain a cafeteria lease for a company in which he had an undisclosed financial
interest. See 217 F.3d 112, 120 (2d Cir. 2000).
23

In light of Sancho and Middlemiss, we see no basis for finding 1346 vague as
applied to this case given that appellants are sophisticated attorneys who were
presumptively aware that their payments to insurance adjusters to expedite
claims created improper conflicts of interest for the adjusters with respect to
their employers. In addition, appellants' efforts to avoid detection, such as
omitting required information on OCA filings and failing to record the bribes in
any of their financial documentation, are indicative of consciousness of guilt,
see, e.g., Bryan, 58 F.3d at 942-43; United States v. McDonough, 56 F.3d 381,
391 (2d Cir.1995), thereby negating appellants' claim that they had no notice
their conduct was illegal.

24

While we do not find that 1346, as applied in this case, is unconstitutionally

vague, we agree with appellants that because the statute does not define honest
services, the potential reach of 1346 is virtually limitless. See Frost, 125 F.3d
at 368-69 (discussing potential breadth of statute and "need to avoid the overcriminalization of private relationships"). As we have noted, "not every breach
of an employee's fiduciary duty to his employer constitutes mail or wire fraud."
United States v. Carpenter, 791 F.2d 1024, 1035 (2d Cir.1986), aff'd, 484 U.S.
19, 108 S.Ct. 316, 98 L.Ed.2d 275 (1987); see also United States v. SunDiamond Growers, 138 F.3d 961, 973 (D.C.Cir.1998) (making same
observation with respect to violations of 1346). For example, a customer who
importunes an employee to allow her to use the company's telephone access
code to make an important long-distance telephone call, in the face of a written
company policy expressly prohibiting non-employees from using the access
code, could conceivably fall within the scope of the statute if read literally. So
too could an employee's use of his company's letterhead to lend authority to a
letter of complaint mailed to the employee's landlord in disregard of the
company's code of conduct prohibiting the use of the company's letterhead for
non-company business.

25

Several circuits, addressing this concern, have interpreted "scheme or artifice to

deprive another of the intangible right of honest services" in such a way as to

properly curtail the statute's reach. See, e.g., id. (recognizing "the risk that
federal criminal liability could metastasize" if 1346 were read too broadly);
Frost, 125 F.3d at 365-69 (noting breadth of literal terms of 1346 and
discussing various approaches to defining reach of statute); United States v.
Cochran, 109 F.3d 660, 667 (10th Cir.1997) (observing that "it would give [the
court] great pause if a right to honest services is violated by every breach of
contract or every misstatement made in the course of dealing"); United States v.
Czubinski, 106 F.3d 1069, 1077 (1st Cir. 1997) (noting that Congress did not
enact 1346 "to create what amounts to a draconian personnel regulation");
United States v. Jain, 93 F.3d 436, 441-42 (8th Cir.1996) (discussing problems
with extending "honest services" doctrine to private sector); cf. United States v.
Sawyer, 85 F.3d 713, 728 (1st Cir.1996) (holding, in context of misconduct by
state government employees, that "[t]o allow every transgression of state
governmental obligations to amount to mail fraud would effectively turn every
such violation into a federal felony; this cannot be countenanced").
26

Some courts have imposed a requirement that the misrepresentation or omission

at issue be "material," such that "an employee has reason to believe the
information would lead a reasonable employer to change its business conduct."
Gray, 96 F.3d at 775 (internal quotation marks omitted); see also Cochran, 109
F.3d at 667 (requiring a showing of materiality); Jain, 93 F.3d at 441-42
(same). The First Circuit has at times adopted a requirement that the
deprivation of honest services must either result in some articulable harm to the
victim or be intended for some gainful, though not necessarily economic, use to
the defendant. See United States v. Jordan, 112 F.3d 14, 19 (1st Cir.1997);
Czubinski, 106 F.3d at 1077 (reversing conviction based on defendant's
unauthorized accessing of confidential tax records where there was no showing
that defendant intended to disclose or otherwise use the confidential
information for personal gain). Finally, several circuits have adopted a
requirement that it must have been reasonably foreseeable to the defendant that
the scheme at issue could have resulted in some economic or pecuniary harm to
the victim. See United States v. Vinyard, 266 F.3d 320, 328-29 (4th Cir. 2001),
petition for cert. filed, 70 U.S.L.W. 3535 (U.S. Jan. 8, 2002) (No. 01-1186);
United States v. Martin, 228 F.3d 1, 17 (1st Cir.2000); United States v.
deVegter, 198 F.3d 1324, 1329-30 (11th Cir.1999); Sun-Diamond, 138 F.3d at
973-74; Frost, 125 F.3d at 368.

27

While we see merit in each of the approaches taken by the different circuits, we
believe the "reasonably foreseeable harm" standard to be superior because, in
contrast to the other tests, it focuses the inquiry on whether the scheme at issue
created a foreseeable risk of economic or pecuniary harm to the victim, which
is consistent with traditional notions of fraud and fraudulent harm. See

McNally, 483 U.S. at 358, 107 S.Ct. 2875 (observing that "the words `to
defraud' ... `usually signify the deprivation of something of value by trick,
deceit, chicane or overreaching.'"). In addition, the "reasonably foreseeable
harm" test has the virtue of being capable of straightforward and consistent
application, while at the same time placing a reasonable boundary around what
is otherwise so boundless a concept as to be a suitable candidate for a finding of
unconstitutional vagueness, see Handakas, 286 F.3d 92, 2002 WL 449536, at
*7-*17. We hasten to add, however, that the foreseeable economic or pecuniary
harm must be more than de minimis, in order to establish a minimum threshold
that will exclude cases, such as the two hypothetical ones discussed above, that
could result in some slight economic harm such as the cost of stationery or a
single phone call.
28

The standard we announce today clearly encompasses the economic risks that
have been recognized by other circuits, such as the economic risks created by
inducing an employee to disclose confidential trade secrets to a competitor, see,
e.g., Martin, 228 F.3d at 17-18; paying an employee or agent to violate his or
her duty to obtain the most advantageous contracts or recommend the most
qualified independent contractors on behalf of his or her employer or principal,
see, e.g., deVegter, 198 F.3d at 1326, 1331; United States v. Pennington, 168
F.3d 1060, 1064-65 (8th Cir.1999); and soliciting illegal or unethical conduct
by an employee that endangers his employer's public reputation, see, e.g., SunDiamond, 138 F.3d at 973-74; Frost, 125 F.3d at 367-68.

29

This prudential limitation on the reach of 1346 is consistent with our previous
decisions upholding convictions under 1346. For example, in Sancho, 157
F.3d at 919, we affirmed the conviction of a real estate developer who, in
seeking to obtain a multi-million dollar letter of credit from a construction
company to secure a construction loan, agreed to bribe the person he believed
to be the company's financial consultant to induce the consultant not to disclose
to the company that the letter of credit would be invested in a sham financing
program. On these facts, it was reasonably foreseeable to Sancho that if his
scheme were successful, it could cause economic harm to the company by
putting its letter of credit at risk and by exposing it to potential liability for the
construction loan. Similarly, in Middlemiss, 217 F.3d at 120, in which a New
York Port Authority employee used his position to obtain a cafeteria lease for a
company in which he had an undisclosed financial interest, it was reasonably
foreseeable that the Port Authority could suffer economic harm as a result of
being deprived of the opportunity to obtain a more favorable lease or to grant
the lease to a superior food service company.

30

Accordingly, we hold that the elements necessary to establish the offense of

honest services fraud pursuant to 18 U.S.C. 1346 are: (1) a scheme or artifice
to defraud; (2) for the purpose of depriving another of the intangible right of
honest services; (3) where it is reasonably foreseeable that the scheme could
cause some economic or pecuniary harm to the victim that is more than de
minimis; and (4) use of the mails or wires in furtherance of the scheme.
31

Applying this standard to the case at hand, we find it to have been fully
satisfied in light of the evidence presented at trial and the instructions given to
the jury. We will affirm a jury verdict if any rational jury "could have found the
essential elements of the crime beyond a reasonable doubt." See Walker, 191
F.3d at 333 (internal quotation marks omitted).

32

The district court properly instructed the jury that in order to convict the
appellants, they had to find that it was "reasonably foreseeable [to the
appellants] that the companies in question might suffer economic harm as a
result of the breach of the employee's duty."

33

Based on the evidence presented at trial, the jury could have reasonably
concluded that appellants, in offering a percentage of the settlement as a
kickback to the insurance company adjusters, intended to obtain favorable
treatment from the adjusters at the expense of the insurance companies'
intangible right to the adjusters' undivided loyalty and honest services. In
addition, the jury could have found that it was reasonably foreseeable to the
appellants that the effect of the payments made to the adjusters would have
been to provide an incentive to the adjusters to not seek the lowest settlement
amount or to not delay the settlement, thereby depriving the insurance
companies of the difference between the most favorable settlement the
adjusters could have otherwise obtained and the settlement actually agreed
upon or the time value of money lost by expediting the settlement and
disrupting the normal patterns of case disposition.

34

We reject appellants' efforts to define the deception at hand as a failure by the

adjusters to report gratuities to their employers and to argue that this deception
was immaterial to the settlement of the personal injury suits.

35

We are also unpersuaded by appellants' uncontested assertions that the

insurance claims were settled within a reasonable range and that they intended
no economic harm. First of all, even if these assertions are true, appellants'
argument conflates the concepts of actual and intended harm with reasonably
foreseeable harm. See, e.g., Vinyard, 266 F.3d at 329-30 (rejecting similar
argument on ground that "[t]he reasonably foreseeable harm test [requires]

neither ... an actual economic loss nor an intent to economically harm the
employer," thus regardless of whether transaction was "objectively fair,"
employer was deprived of opportunity to search for best price). Moreover, the
jury could reasonably have inferred that the PI Plaintiffs would have been
willing to accept a settlement that did not include the cost of the payments to
the adjusters and, therefore, that each of the settlements was necessarily
inflated by the amount of the payment. From this, it is no great leap to conclude
that the payments made to the adjusters came out of their employers' respective
pockets. We note that this was the same conclusion reached in the insightful
and thorough opinion by the state trial court that tried and convicted other
defendants who were involved in the same scheme. See People v. Reynolds,
174 Misc.2d 812, 667 N.Y.S.2d 591, 595-96 (N.Y.Sup.Ct.1997) (Fried, J.)
(finding that kickback constituted economic harm to the employers, who were
deprived of the opportunity of possibly settling for less). In light of the
foregoing evidence and the instructions to the jury, we conclude that appellants'
convictions were supported by sufficient evidence.
36

To recap, we hold that to convict a defendant of mail or wire fraud where the
purpose of the scheme is to deprive another of the intangible right of honest
services, as defined by 18 U.S.C. 1346, the government does not have to
prove actual or intended economic or pecuniary harm, but it does have to prove
that it was reasonably foreseeable that the fraudulent scheme could result in
some economic consequence that was more than de minimis. Because this
requirement was satisfied in the instant case, we affirm the judgments of the
district court convicting appellants of mail and wire fraud, and conspiracy to
commit mail fraud, in violation of 18 U.S.C. 371, 1341, and 1343.

CONCLUSION
37

The judgments of conviction are affirmed.

Notes:
1

We do not rule out the possibility that the government in this case could have
established actual or intended economic or pecuniary harm had it been required
to do so